Recession enigma. We have now had 2 consecutive quarters of negative growth, which has traditionally defined a recession. However, what is lacking are large scale layoffs. The labor market continues to be tight giving workers an upper hand on how and where they work. The pandemic gave those workers a taste of working remotely and management hasn’t forced the issue of bringing the workforce back to the office for fear of losing talent.
The Federal Reserve is doing what it must to decrease demand to stabilize pricing by increasing interest rates. A tighter monetary policy should do the trick, but a “soft landing” is tricky to navigate. If all the goes right, maybe this “recession” can be averted, but most pundits feel this to be unlikely.
What this means for the office market is a continued wait-and-see. There have not been widescale layoffs, but we are continuing to see national firms reducing their footprint. The most notably was Disney pausing their relocation of 2,000 high paying jobs from California to Orlando. Fortunately, regional, and local companies have picked up the slack.
For the second quarter of 2022, activity in the market was neutral as evidenced by a modest increase in net absorption. In some submarkets, building parking lots are near empty, indicating a deep underutilization of office space.